This study of debtor-creditor relations covers a three-century span from the
beginnings of colonization to the enactment of a permanent system of national
bankruptcy relief in 1898. Geographical areas covered are New England, and the
Middle and South Atlantic sections. Two central themes can be discerned during
that time from the relationships between debtors and creditors -- imprisonment
for debt and discharging an insolvent debtor of his obligation by bankruptcy.
The history of bankruptcy provides a perspective on a larger and more profound
matter -- the evolution of the role of credit in America.

From the back cover blurb:

Americans now depend more heavily upon credit than any other society on Earth, or any other time in history. Borrowing has become a way of life for millions of families, and it is hard to imagine a time when charge accounts did not exist. Nonetheless, it would be a mistake to assume that, because a wallet filled with plastic instead of cash is a relatively new phenomenon, Americans have not been borrowers and lenders since the colonization of the New World. Author Peter J. Coleman proves otherwise. In one Form or another -- notes of hand, book credit, commercial paper, mortgages, land contracts -- settlers borrowed to pay their passage from Europe, to buy and clear land, to build and operate mills, to purchase slaves, and to gamble and drink. Debtors' prison awaited those who could not pay their debts, and a pauper's grave received the unfortunate who lacked the private means to feed and clothe himself in prison. While the debtors' prisons described in this book no longer exist, the author maintains that our credit-oriented society has yet to devise cheap, efficient, equitable, and humane methods of enforcing contracts for debt.

Review by Susan PannellFrom Turnarounds and Workouts, September 15, 1999

Suppose that, three hundred or so years ago, you were in urgent need of a
pig. But you couldn't afford the pig, so you purchased it on credit. (Yes, there
was credit in the woodsy days of this country; it wasn't strictly a cash and
barter economy.) Some time later, the pig having served the purpose for which it
was intended and hence being no longer recoverable, and you not being the winner
of the lottery you'd relied upon to pay your debt, the creditor seeks
satisfaction.

He could proceed against you in a couple of different ways, but either way,
assuming you still hadn't won that lottery, you went to jail. And there you
rotted, unless you had the means to buy your way out, in which case you wouldn't
be there in the first place. In a notorious perversion of logic, a debtor, like
any prisoner, was expected to feed and clothe himself while incarcerated. A
pauper's grave - the so-called potter's field - awaited the debtor who died in
prison. It could have been worse: under ancient Roman law, creditors were
entitled to chunks of your actual body and - sorry, Will Shakespeare - there was
no penalty for hacking off a disproportionate slice.

What changed this nefarious system? Not sentiment (at least not primarily),
but hard economic facts. For one thing, It was an ineffective arrangement. The
creditor derived malicious satisfaction from watching his debtor fade away in
prison, but that didn't satisfy the debt. For another thing, the colonies
suffered a chronic people shortage. They needed laborers and militiamen. Society
couldn't afford to lose the prisoner's labor, or his ability to shoulder a
musket and defend against Indian attacks. Nor could society afford to support
the innocent wife and children "perishing with Hunger & Cold"
(here's where sentiment entered into the equation).

The system began to be modified in various ways. For some categories of
debtors, commonly single men who owed little, some colonies substituted
indentured service for imprisonment. Another modification, applicable to petty
debts, provided a release from prison and immunity from rearrest of the debtor
swore he was impoverished - presumably a more effective deterrent centuries ago
when there was true shame associated with being a deadbeat. A third modification
put clothing, furniture, eating utensils, and tools beyond the reach of
attachment.

None of this was of any help to the larger defaulters, the businessmen, and
it was for their benefit (economic necessity, again) that colonial bankruptcy
laws began to evolve. Interestingly, the colonies preferred voluntary
proceedings, giving the right of action to the insolvent, in contrast to English
bankruptcy practice, which sided with the creditor. Development of bankruptcy
relief was by no means smooth as, predictably, many stern and rockbound
colonists took a moral stance against it. Complicating matters was the
requirement that, until the Revolution, a debtor relief law, like any colonial
legislation, had to be approved by the Crown, in this case the Board of Trade.

The author provides a painstaking region-by-region analysis of the
development of bankruptcy law, and sums up all the history in a concluding
chapter.

Peter J. Coleman, Ph.D., was educated at Victoria University of Wellington,
New Zealand, the University of Texas and Harvard Law School. He is the author of
a wide range of books and articles on New Zealand and American History, and is
Emeritus Professor of History, University of Illinois at Chicago.